Repeals the minimum wage reimbursement credit.
BILL NUMBER:S4500A REVISED 1/24/14
TITLE OF BILL: An act to repeal certain provisions of the tax law relating to the minimum wage reimbursement credit
PURPOSE: To repeal the minimum wage reimbursement credit.
SUMMARY OF PROVISIONS:
Sections 1 through 7 of the bill repeal and amend those sections of law which relate to the minimum wage reimbursement tax credit.
Section 8 establishes the effective date.
JUSTIFICATION: The 2013 New York State Budget raised New York's minimum wage through a three-year phase-in that will reach $9.00 in 2016. While there are many who believe that this increase did not go far enough, fast enough and that it should have included indexing that would cause the wage to automatically rise along with inflation or the cost of living, any increase in the minimum wage goes a long way to helping thousands of hard-working New Yorkers who are struggling just to make ends meet. However, the minimum wage agreement also included what amounts to a poison pill, in the form of an uncapped, taxpayer-subsidized credit that perversely incentives businesses, including mega-corporations, to replace adult workers with teenagers and keep wages as low as possible.
Simply put, this tax credit is an ill-conceived, counterproductive piece of policy and a waste of precious resources. While there is no cap on the amount of the credit that can be allocated, it is conservatively expected to cost the state between $20 and $40 million per year. The ostensible goal of improving the employment prospects of young people could be vastly better served by any number of initiatives that would not carry the same disastrous incentives such as more than doubling funding for the Summer Youth Employment Program.
There is also essentially no protection for fired workers. While firing someone solely to get this tax credit is technically against the law, technically only matters if the person who gets fired: knows about the tax break, knows about the law, knows that she got fired so she could be replaced by an eligible teenager, can prove that her employer's desire to access the credit is the only reason she was fired, and has time to wait for her case to be resolved within an overburdened, underfunded system.
This tax credit has been roundly criticized not only by workers' rights advocates and other voices from the left, but by staunchly business-friendly outfits from the Wall Street Journal to Crain's New York Business to the Empire Center for New York State Policy. No less than Greg David of Crain's described the specifics of the tax break as follows:
"The state will subsidize the entire increase in the minimum wage for workers between 16 and 19 in the first year and up to 75% in the third year, when the wage is increased to $9 an hour. So firing someone 20 and over and replacing them with someone the right age offers employers a bonus of $1,560 to $2,808. Only people making exactly the
minimum wage qualify for the credit, so there is a strong incentive not to pay any more. Oh, and the credit is available to all companies. McDonald's franchises upstate will get a lot of benefits; those in the city who routinely pay more than the minimum wage now have an incentive to lower wages."
This is a bad and destructive piece of policy and a waste of taxpayer dollars. It is in the best interest of workers, responsible businesses, and the State as a whole that this tax credit be repealed immediately.
LEGISLATIVE HISTORY: This is a new bill
FISCAL IMPLICATIONS: Significant savings to the state.
EFFECTIVE DATE: This act shall take effect immediately and shall be deemed to have been in full force and effect on and after January 1, 2014.
STATE OF NEW YORK ________________________________________________________________________ 4500--A 2013-2014 Regular Sessions IN SENATE April 3, 2013 ___________Introduced by Sens. PERALTA, AVELLA, BRESLIN, GIANARIS, KRUEGER, MONT- GOMERY, PARKER, SAMPSON, SERRANO, STAVISKY -- read twice and ordered printed, and when printed to be committed to the Committee on Investi- gations and Government Operations -- recommitted to the Committee on Investigations and Government Operations in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to repeal certain provisions of the tax law relating to the mini- mum wage reimbursement credit THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 38 of the tax law, as added by section 1 of part EE of chapter 59 of the laws of 2013, is REPEALED. S 2. Section 187-s of the tax law is REPEALED. S 3. Subdivision 46 of section 210 of the tax law is REPEALED. S 4. Clause (xxxv) of subparagraph (B) of paragraph 1 of subsection (i) of section 606 of the tax law, as added by section 4 of part EE of chapter 59 of the laws of 2013, is REPEALED. S 5. Subsection (aaa) of section 606 of the tax law is REPEALED. S 6. Subsection (z) of section 1456 of the tax law is REPEALED. S 7. Subdivision (cc) of section 1511 of the tax law is REPEALED. S 8. This act shall take effect immediately and shall apply to tax years commencing on or after January 1, 2014.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10133-02-4